Bangladesh’s Power Sector Drowns in Rising Subsidies Despite Flat Demand
Bangladesh’s power sector is facing rising financial strain as subsidies surge despite limited growth in demand. The daily electricity generation capacity reached 28,909 megawatts by the end of 2025, yet costly contracts and underused plants have pushed finance to record levels. Officials now warn that expenses will again exceed projections for the current financial year.
In 2021-22, the government allocated Tk 11,940 crore for power subsidies, with monthly payments staying below Tk 1,000 crore. By 2022-23, the figure had tripled to Tk 29,511 crore. The following year, it climbed further to Tk 35,000 crore.
Experts link the sharp rise to two key factors: stagnant demand and expensive power purchase agreements. Around 80% of the finance now covers capacity charges—fixed payments to private plants even when they remain idle. Over the past 30 months, these charges averaged Tk 3,000 crore monthly. To ease financial pressure, the government cleared Tk 24,000 crore in arrears to private suppliers in the 2025-26 fiscal year. It also repealed the controversial Quick Enhancement of Electricity and Energy Supply Act in November 2024, aiming to introduce transparency in future power deals. Despite these steps, finance continues to grow faster than expected. Officials now admit that outlays for 2025-26 will surpass initial estimates, repeating a pattern seen in the previous three years.
The rising finance highlights the financial burden of maintaining excess capacity and non-competitive contracts. With demand failing to match supply, the government remains locked into high fixed costs. The repeal of the special provisions act marks a shift in policy, but its impact on future spending remains to be seen.
